9. LEASES
The Company leases real estate, including offices and manufacturing facilities and has entered into various other agreements with respect to assets used in conducting its business. The Company’s leases have remaining lease terms ranging from 0.33 years to 8.01 years. Some of the lease agreements contain rent holidays and rent escalation clauses that were included in the calculation of the right of use of assets and lease liabilities.
The Company’s building leases are subject to annual operating cost charges that may change from time to time during the lease term. The Company’s lease liabilities are not remeasured as a result of changes to the operating costs; rather, these changes are treated as variable lease payments and recognized in the period in which the obligation for the payments was incurred. The annual operating costs are a non-lease component of the contracts; however, the Company has elected to adopt the practical expedient whereby such costs are not separated from the lease component.
The following table presents the components of lease cost (in thousands):
| | | | | | | | | | | | | |
| Years ended December 31, |
| 2025 | | 2024 | | |
| Operating lease cost | $ | 1,520 | | | $ | 1,560 | | | |
| Variable lease cost | 381 | | | 461 | | | |
| Total lease cost | $ | 1,901 | | | $ | 2,021 | | | |
The Company has entered into an agreement to lease additional mixed-use space adjacent to the Company's research and development headquarters in Burnaby, British Columbia. The lease is expected to commence in 2026, and it is expected to result in the recognition of right-of-use assets and lease liabilities of approximately $0.9 million.
The following table presents the weighted-average lease terms and discount rates for operating leases:
| | | | | | | | | | | | | |
| As of December 31, | | |
| 2025 | | 2024 | | |
| | | | | |
| Weighted average remaining lease term, in years | | | | | |
| Operating leases | 7.6 | | 8.4 | | |
| | | | | |
| | | | | |
Weighted average discount rate(1) | | | | | |
| Operating leases | 9.8 | % | | 10.1 | % | | |
| | | | | |
(1) For the lease contracts denominated in foreign currencies, the weighted average discount rate was calculated by converting the foreign currency amounts to equivalent amounts in USD.
Future minimum operating lease payment under non-cancelable leases as of December 31, 2025, were as follows (in thousands):
| | | | | |
| Operating Leases |
| Year Ending December 31, | |
| 2026 | $ | 1,456 | |
| 2027 | 1,334 | |
| 2028 | 1,356 | |
| 2029 | 1,248 | |
| 2030 | 1,279 | |
| Thereafter | 4,024 | |
| Total future minimum lease payments | 10,697 | |
| Less: Interest | (3,199) | |
| Total lease liabilities | $ | 7,498 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.